Use the Information for the Question(s) Below

question 68

Multiple Choice

Use the information for the question(s) below. As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude.
-Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil.Assuming you currently have 10,000 Bbls of WTI crude,what should you do?

• A) Sell 10,00 Bbls WTI crude on the market and use the proceeds to purchase and refine ANS crude.
• B) Do nothing; refine the 10,000 Bbls of WTI crude.
• C) Trade the 10,000 Bbls WTI crude with the other refiner and refine the 10,150 Bbls of ANS crude.
• D) Trade the 10,000 Bbls WTI crude with the other refiner and then sell the 10,150 Bbls of ANS crude.

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Definitions:

Equilibrium Price

The cost at which the amount of a product or service sought after is equal to the amount available, leading to equilibrium in the market.

Equilibrium Quantity

The quantity of goods or services demanded equals the quantity supplied at the market price.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is not achievable.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time frame.